Post # 82 - New ACEEE "Scorecard" Ranks States' Pursuit of Energy Efficiency

Last year, the American Council for an Energy-Efficient Economy, a non-profit organization promoting energy efficiency, released a study analyzing the results of residential feedback programs spanning over 30 years. ACEEE concluded that smart meters, in and of themselves, cannot be expected to significantly reduce either residential power use or consumer electric bills. Among other aspects, increased energy efficiency is a necessary adjunct.

In a more recent development, ACEEE this month issued its “2011 State Energy Efficiency Scorecard,” a comprehensive ranking of the states based on an array of metrics intended to capture best practices and recognize leadership in energy efficiency policy and program implementation. The focus of the Scorecard is not on smart grid issues, but rather the broader issued of energy efficiency.

States were evaluated in six energy efficiency policy areas: utility and public benefits programs and policies, transportation policies, building energy codes, combined heat and power, state government initiatives and appliance efficiency standards. Among the 2011 Scorecard's key findings:

»Because of continuing economic uncertainty, states are continuing to use energy efficiency as a key strategy to generate cost savings, promote technoligical innovation, and stimulate growth.

»Massachusets has overtaken California in ACEEE's rankings as the leader. Following in ACEEE's "top ten" are New York, Vermont, Oregon, Washington, Connecticut, Minnesota, Rhode Island and Maryland.

»Michigan, Illinois, Nebraska, Tennessee, Alabama and Maryland are the most improved states, with Michigan, Illinois and Maryland significantly increasing utility-sector energy efforts n order to meet energy savings targets established in Energy Efficiency Resource Standards (EERS).

»A total of 24 states have now adopted EERS, which set long-term energy savings targes and drive utility-sector investments in energy efficiency programs. States that adopted EERS policies in 2007 and 2008 are realizing signifigant energy savings and moving ahead in the Scorecard's ranking.

»Total budgets for electricity efficiency programs increased to $4.5 billion in 2010, up from $3.4 billion in the prior year.

»States continue to improve policies to reduce financial, technical and regulatory barriers to adoption of combined heat and power systems, which generate electriciy and thermal energy in an integrated system.

»Twenty-nine states have either adopted or have made significant progress towards the adoption of the latest energy-savings residential and commercial building codes.

»Some states "remain ahead of the curve" in adopting policies to reduce vehicle miles travelled and to promote the purchase and manufacture of energy-efficient vehicles. On the flip side, however, ACEEE finds that over half the states have "minimal or no" policies to encourage energy efficiency in the transportation sector.

Overall, ACEEE concludes that energy efficiency policies and programs continued to advance in 2011. In particular, a group of "leading states remains steadfast in their commitment to the efficient use of energy in transportation, buildings, and industry. . . ." And a "growing number" of states have made progress in the area of energy efficiency -- "some rapidly."

At the same time, ACEEE finds that a wide gap remains between states near the top and near the botton of the Scorecard's rankings.

Post # 81 - Can Prepaid Services Foster Smart Grid Acceptance by Low Income Consumers?

Unlike most transactions, public utility services are usually paid for only after consumption, measurement, and billing. While prepaid meters long have been available in the United States, they are seen in just a handful of jurisdictions. But as smart meters are deployed across the country, prepayment has been added to the growing list of potential smart meter applications. But, according to the Distributed Energy Financial Group (DEFG), a management consulting firm in the energy sector, that doesn’t necessarily make it an idea whose time has come.

A new DEFG white paper “Low Income Consumer Issues and Voluntary Prepaid Energy Offerings: Perspectives from Three Industry Thought Leaders.”, identifies a number of "core questions":

Is providing a prepayment “option” to payment‐challenged customers contrary to the spirit (and perhaps the letter) of laws prohibiting discrimination in provision of utility services? Do potential negative consequences for some customers appear to outweigh the benefits of prepayment programs? Most consumer advocates answer “yes” to these questions and believe that the introduction of prepayment programs would create more problems than it solves.

At the same time, DEFG states that extensive research in 2010 and 2011 reveals that prepaid energy could be transformational as it is the first customer-facing application of the smart grid. DEFG launched the 2011 Utility Prepay Working Group to further explore leading regulatory and consumer opportunities and challenges presented by prepaid energy. Regulatory issues include disconnect and reconnect policies, weather moratoriums, forms of account notification, cost and benefit allocation, fees and rates.

The white paper addresses two key questions. First, how can a balance be struck between allowing consumers to exercise their preferences and ensuring that adequate consumer protections are in place? Second, how can regulatory rules and practices, including for low income consumers, be revised or updated to allow for innovation and new offerings such as prepaid energy or other new services enabled by smart grid yet maintain the intent of the original regulatory rationale?

The study authors assert that while these issues need to be addressed to implement a prepaid offering for all customers, they present greater concerns when dealing with low-income customers. Consumer advocates argue that prepaid energy invites low-income customers to make tough choices, potentially opting to disconnect electric service to keep money available for other necessities such as food, clothes and gasoline. Yet, existing prepaid customers provide positive feedback, primarily the convenience, flexibility and control that goes with paying any amount at any time. Consumers find that prepayment allows them to budget in a manner most compatible with their lifestyle and income (e.g., make payments weekly or every other week). The authors recognize that there is a tension between the possibilities enabled by new technologies and consumer protections.

The DFEG paper finds certain “broad areas of consensus,” including:

• Prepay offerings should be voluntary and not directed specifically to low income customers but offered to all customers served by utilities.

• Consumer protections do and will exist for a prepaid service offering as they have been in place for post-paid consumers for decades.

• Prepaid service touches the body of bill pay and consumer protection rules and highlights the need to update the regulatory rulebook.

• There is a need to analyze regulatory principles as distinct and separate from the rules and practices that implement those principles, for example, limiting the form of communication for disconnect notifications to letters and/ or a knock on the door may not only be impractical but counterproductive when considering consumer credit issues.

The paper concludes that "a lack of trust among stakeholders has been palpable during the course of DEFG’s research and conference calls around the potential of utility prepaid offerings." While some stakeholders consider prepaid service a positive innovation for consumers, others view it as potentially predatory or discriminatory against low‐income consumers. A particular consumer concern, in this regard, is the possibility using smart meters to facilitate automatic service shut-offs. The paper finds that stakeholders, including utilities, recognize the importance of ensuring that low‐income consumers pay fair rates for electricity and are supported safely during dangerous weather periods. "[T]he biggest barrier to policy solutions. . .[is] trust among [utilities] and consumers."

Post # 80 - New IBM Study Shows Continuing Consumer Confusion Over Smart Grid

A new IBM survey of 10,000 people in 15 countries – Australia, Belgium, Brazil, Canada, Chile, Denmark, France, Germany, Ireland, Japan, the Netherlands, New Zealand, Poland, the United Kingdom, and the United States – shows that consumers remain confused about what a smart grid is and what it means to them.

Sixty percent of those surveyed did not know the meaning of the terms “smart grid” or “smart meters.” Somewhat inconsistently the study also indicates that more than 50% of respondents still expect the deployment of smart grids and smart meters to foster development of clean energy technologies, and over 60% believe that these technologies will benefit their families. But 50% didn’t understand the term “time of use pricing” – a key concept in the debate on how consumers can benefit from the installation of smart meters (for a link to discussions of time-of-use or "dynamic" pricing, see here) – while 30% were unaware of the basic mechanism used for charging for electricity–the amount paid per kilowatt hour.

Saving money was noted as having one of the highest levels of influence on respondents making changes to their energy usage behavior (62%), though it was no longer the dominating factor. This was consistent with almost all of the countries in North America, Europe, Australia and New Zealand. National economic considerations were important to more respondents (51-55%) than environmental and natural resource considerations (43-51%), although how these two ranked relative to each other differed by age group.

Information sent directly to consumers by the provider (bill and inserts) remained the top reported single influence across all of the countries with more than one-third of respondents using energy bills and inserts to source information about energy costs, environmental impact, and alternative suppliers. However, reliance on traditional media (television, newspapers/magazines, etc.), internet-based sources (non-provider web sites, social media, etc.), and opinions of friends and family in aggregate outweigh the influence of direct-contact sources like bill inserts and provider web sites.

Most of the relative rankings of information sources remained consistent across age groups, but a few notable exceptions emerged. The two most significant age variations were found in the influence of government information sources (ranked fifth among those 35 or older, eighth among those 25-34, and last among those 18-24) and friends and family (fifth among those 18-34, seventh among those 35-54, and ninth among those 55 and over).

More than half of the respondents do not know if their energy provider has a green energy program that is available to them – and almost a quarter of those who participate in green energy programs have no idea if they pay a premium for that power, or how much more they pay. At the same time, customers who were most knowledgeable were 42% more likely to have a positive opinion of local deployment programs underway or proposed, 51% more likely to believe that these programs would bring benefits to their family, and 64% more likely to change energy usage patterns to meet specific goals. Forty-two percent of the respondents are committed to engaging more with their providers to meet their personal goals and objectives, while 33% are not likely to take added responsibility for these decisions in the short to mid term.

Post # 79 - New York PSC Smart Grid Policy Statement Highlights the Need for Consumer "Engagement"

Last week, the New York State Public Service Commission issued its “Smart Grid Policy Statement," intended to establish regulatory policies and guidelines for utilities to following regarding the development of smart electric grid systems and associated efforts to modernize the electric grid. The NYPSC hopes that its guidelines will “creat[e] the conditions that will allow optimal technology solutions to flourish.” The policy statement also emphasizes the importance of consumer acceptance.

The NYPSC guidelines themselves, which include customer acceptance but of course cover a much broader area, provide as follows:

* In the short term, utilities are to pursue established and reliable technologies that can provide a relatively certain return on investment. In the longer term, the billions of dollars the federal government has provided for smart grid projects nationwide will generate a significant base of knowledge and experience which, along with further development of smart grid standards, will help identify those technologies that are most effective and efficient.

* Smart grid technologies will utilize a hybrid of both public and private networks. Utilities and communication providers should work together to ensure appropriate use of commercial facilities, and to limit utility capital investments in dedicated communications infrastructure.

* Utilities must provide basic information on smart grid to customers who are largely unaware of this technology. Utilities further must provide a thoughtful and comprehensive customer education plan before commencing with implementation of technologies that require extensive customer engagement.

* Smart grid projects must be able to show demonstrable benefits in excess of costs.

* For most smart grid projects, rate recovery will be addressed through traditional means. The Commission will consider risk-sharing mechanisms for novel or unproven technology.

* Utilities can start to develop smart grid plans and projects using the existing industry standards as building blocks.

* Utilities must develop the capability to build and maintain cyber security standards. Utilities will bear the responsibility to ensure that cost-effective protection and preparedness measures are employed to deter, detect, and respond to cyber attacks, and to mitigate and recover from their effects.

* Utilities and third-party providers must protect customer privacy when projects involve the collection and use of customer data.

With specific reference to customer education and “engagement,” the NYPSC policy statement notes that “a large number of customers do not know how the smart grid works.” Thus, the PSC concludes, one benefit of early customer education may be “to refocus the public dialogue about smart grid, which seems to be centered on smart meters. Some customer concerns may be alleviated if they understand that the smart grid is not just about meters.” The PSC calls on utilities to make customers more aware of the steps they have already taken to develop the smart grid in their transmission and distribution networks.

Before commencing with large customer-centered smart grid programs, utilities must lay the groundwork with comprehensive customer education programs. Such educational efforts can increase acceptance, improve utilization, and ease implementation issues, as well as allowing utilities an opportunity to learn more about the services their customers want and are likely to utilize.

The NYPSC adds that customers participating in such programs need to understand their roles and responsibilities, as well as the role of the utility and any third parties. “An important aspect of smart metering is its ability to enable active participation by customers, but customers must be equipped with the knowledge required to participate in a meaningful way.” Customers will need to be actively supported in getting the right information to make informed decisions on their participation, and in acquiring the necessary knowledge and skills to take advantage of smart meter-enabled programs.

The Policy Statement notes customer education programs must also deal candidly with the rate consequences of smart grid capital investments. The PSC believes that if implemented properly, the smart grid can mitigate cost increases, as well as offer customers more reliable and more environmentally responsible service. “[B]ut customers are wary of further rate increases and will have to be educated to have reasonable expectations regarding the potential of smart grid to lower electric bills.”
Ultimately, the PSC holds, the success of demand response depends on convincing people to change how and when they use electricity:

Clear, concise, and relevant information in advance of a project involving new customer tools, information or interfaces is required to ease customer concerns and improve adoption. Influencing customer behavior requires that utilities and third party providers explain and demonstrate to customers the benefits of a proposed smart grid program.

Thus, the statement concludes, “if a smart grid technology relies on customer involvement in order to provide all or some of the anticipated benefits, any utility proposal to deploy such technology must include a plan for how customers will be engaged and should include an analysis on the expected level of customer participation.”

Post # 78 - New Study Has Good and Bad News Regarding Consumers' Attitudes to the Smart Grid

A new study by Market Strategies International, a market research and consulting firm involved with communications, energy and technology issues, finds what it calls good and bad news when it comes to consumer awareness and support of smart grid technologies. In its release announcing the study's results, Market Strategies:

The good news is that a large majority of Americans -- after we give them basic information about smart grid and smart meters -- say it's a priority issue and strongly support the implementation of these technologies by utilities. The bad news is that 72 percent of consumers overall admit they know little about the technologies. Less than a quarter of respondents say they fully understand the concept.

These findings are from the first wave of Market Strategies' on-going 2011 E2 (Energy + Environment) Study. Conducted twice a year, the national survey is designed to gain an understanding of Americans' attitudes and opinions about energy and energy-related issues. The latest version represents the “tenth wave” of this on-going study. A total of 989 interviews were completed May 19 through June 2, 2011 with consumers nationwide. Respondents were recruited via an online panel to reflect key characteristics of the US population. The data were weighted by age, gender, and census region to match the demographics of the US population. (Market Strategies cautions that “due to its opt-in nature, an online panel does not yield a random probability sample of the target population. As such, it is not possible to compute a margin of error or to statistically quantify the accuracy of projections.”).

The updated study finds the level of Americans' smart grid/meter awareness hasn't increased noticeably during the past several years, despite the steady flow of information appearing in media and other outlets. On the other hand, while “general awareness still lags,” Market Strategies believes that “the ready endorsement so many consumers give smart grid/meter -- once it's explained -- speaks volumes about the viability and strong appeal of the technologies and their associated benefits.” Moreover, Market Strategies believes that “it’s important to note that four of the five consumer segments in the energy market support the idea of utilities working quickly towards implementing smart grid/meter technologies." Further, the study finds that “nearly unanimous support for smart grid/meter coming from most of the market's various segments. . . .”

The overall study apparently is not publicly available, beyond what Market Strategies put in its release. Nonetheless, the findings certainly are consistant with with the conclusions of many other studies:
consumer education -- and, more importantly, consumers' belief they will significantly benefit -- will be essential to the ultimate success (or failure) of smart grid development.

Post # 77 - California PUC Adopts New Smart Meter Privacy Rules

In late 2009. the California Public Utilities Commission (CPUC) ruled that the big three investor-owned utilities in California -- Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric -- would have to provide their customers with real-time residential usage data through smart meters by the end of 2011. Last spring, following extensive stakeholder debate, the CPUC released proposed smart meter privacy rules.

Now, in a decision issued last week, the CPUC issued final smart meter privacy rules. Among other things, the rules require the three utilities to:

1. Provide customers with detailed energy usage, bill-to-date, month-end bill forecast, and projected month-end energy price on their websites – updated daily. Moreover, the information must be available with hourly or 15-minute granularity -- matching the time granularity programmed into a smart meter.

2. Provide "tier alerts" via some form of rapid communication (email, tweets, etc.) when customers move from one price tier to the next.

3. Provide a website calculator to help consumers determine if they would save money by switching to a time-of-use rate

4. Allow consumers to authorize third parties to receive their backhauled smart meter data directly from the utility.

5. Set up a program to roll out home area networking devices to be directly connected with smart meters.

The CPUC said that data on energy consumption generated by smart meters and transmitted by the smart grid will prove critical to future conservation and grid management efforts. The CPUC asserts that enabling consumers and companies to assess and act on this information is key to advancing many of California's energy policies, such as promoting conservation, reducing demand in response to grid events and price signals, reducing summer peak demands, and efficiently incorporating renewable energy and electric vehicles into grid operations.

PG&E, SCE and SDG&E will now have six months to implement the requirements. In the meantime, the CPUC will be exploring whether the new rules should also apply to electric service providers (non-utility entities that offer electric service to customers within the service territory of an electric utility) and community choice aggregators (programs within the the service area of investor-owned utilities that allow cities and counties to buy and/or generate electricity for their residents and businesses).

Post # 76 - New Electric Industry Study Highlights Benefits of Smart Meters to Consumers--And Need for Consumer Education to Achieve Those Benefits

A new white paper by the Institute for Electric Efficiency (IEE), an organization representing about 70% of the U.S. electric industry—including investor-owned utilities, public power utilities, electric cooperatives, and foreign utilities—finds that for a wide variety of utilities under a range of assumptions, the customer and utility benefits of investing in digital ‘smart’ meters, or advanced smart metering technologies and associated energy management technologies will outweigh the costs.

Co-authored The Brattle Group, an economic, financial and regulatory consulting firm, the paper—The Costs and Benefits of Smart Meters for Residential Customers—quantifies three categories of benefits from smart meters: operational, customer, and societal.

In deriving its cost assumptions, IEE relied on smart meter business cases and equipment manufacturers’ prices, as well as projections and other sources. IEE then used a framework involving different types of utilities and customers to compare smart meter benefits and costs. The framework identified four kinds of utilities defined by real-world factors that influence the overall business case for smart meters, including current generation mix, renewable energy portfolio, regulatory environment, energy prices, and emphasis on efficiency and conservation.

In looking at utility customers, the IEE white paper factored in both how likely they were to be engaged in a utility’s energy programs, and how actively they would manage their energy use. Assuming a service area of one million households, IEE found that the total cost for a utility to invest in smart meters and associated home energy management technologies will vary from a low of $198 million to a high of $272 million.

In looking at benefits, the IEE study found that the smart meter investment will produce operational savings (resulting from avoided metering costs, automated outage detection, and remote connections) of between $77 million and $208 million, and customer-driven savings (resulting from energy pricing programs, in-home enabling technologies, and energy information) of between $100 million and $150 million. The net benefits from investing in smart meters ranged from between $21 million and $64 million for the four types of utilities.

With specific reference to consumer benefits, the IEE study calculates five benefits:

1. Avoided generation capacity costs: This is calculated as the change in peak demand times the avoided cost of generation capacity, and then scaled due to system line losses (assumed to be eight percent) and reserve margin (assumed to be 15 percent). The avoided cost of generation is $50 per kW-year and is based on Brattle’s experiences in this field.

2. Avoided transmission and distribution capacity costs: This is calculated as the change in peak demand times the avoided cost of transmission and distribution, and then scaled due to system line losses and reserve margin. The avoided transmission and distribution capacity cost is assumed to be $10 per kW-year and is based on Brattle’s previous experience.

3. Avoided energy costs: This is calculated as the change in energy in each time period (offpeak, peak, and critical peak) times the cost of energy in the respective time period, and then scaled due to system line losses. The avoided energy costs vary by region and are based on reviews of energy market data as well as Brattle’s prior experience.

4. Avoided carbon dioxide costs: This is calculated as the change in energy use in each time period (off-peak, peak, and critical peak) times the carbon dioxide emissions rate in the respective time period times the value of each ton of carbon dioxide emissions. The emissions rate for each utility differs based on the assumed fuel mix. Furthermore, the value of carbon dioxide emissions is the same for each utility but changes over time with a value of zero until 2016. The value of carbon dioxide emissions is $15 per metric ton in 2017 and increases linearly until 2030 when it reaches a price of $60 per metric ton. (This assumes no national carbon legislation will be in place until after the 2016 Presidential election).

5. Avoided gasoline costs: This is calculated as the change in gallons of gasoline consumed times the price of gasoline (assumed to be $3 per gallon [2011 dollars], a conservative approximation for the national average gas price). This benefit, of course, is only applicable to the customers with electric vehicles. But the authors assert that “the strategy with the potential to achieve the greatest financial impact is to focus on accelerating [electric vehicle] adoption. The benefits of [electric vehicles]. . . are disproportionately high, indicating that even modest increases in [electric vehicle] adoption will have a large impact on benefits.

The study concludes that “the customer-driven benefits could be much greater with more investment in and focus on customer education and engagement.” The IEE document states:

Over the 20 year horizon in this study, most customers migrate from passive engagement in energy management to much more active strategies. This holds true for all utilities types. Hence, a potential area for further study is how to accelerate this process so that a broad array of customers are ready, willing, and able to engage in energy management soon after smart meters are deployed.

In this regard, as in similar studies by other groups (see here, here and here), IEE recognizes the importance of consumer education to achieve consumer buy-in: “Given the high satisfaction ratings of dynamic pricing pilot participants where education is a key component, we believe the combination of program choice based on personal preferences (thereby avoiding opt-in, opt-out arguments) with comprehensive consumer education could yield tremendous financial and societal benefits.”